GOVERNMENT FINANCE STATISTICS

August 2004 GOVERNMENT FINANCE STATISTICS THE GOVERNMENT FINANCE STATISTICS MANUAL 2001 FRAMEWORK AND ITS RELATIONSHIP WITH THE EUROPEAN SYSTEM OF ACCOUNTS 1995 JÓHANN R. BJÖRGVINSSON STATISTICS DEPARTMENT C:\Documents And Settings\Vascone\Desktop\Eventi\29maggio\GFS-ESA Relationship-August26.2004.Doc June 4, 2007 (11:02 AM)

- 2 - The Finance Statistics Manual 2001 Framework and its Relationship with the European System of Accounts 1995 A short description of how the Finance Statistics Manual 2001 (GFSM 2001) system relates to systems of national accounts like the European System of Accounts 1995 (ESA 95) may be of interest to countries that use, or are considering using, the GFSM 2001 methodology as a base for their fiscal reporting. This interest may also be shared by compilers of finance statistics (GFS) and national accounts and by fiscal analysts in general. Primarily, the GFSM 2001 system is largely harmonized with the ESA 95, and their definitions of concepts are the same; however, notable differences exist between the two statistical systems. The most important difference is the focus of the GFS system on financial transactions taxing, spending, borrowing, and lending while the ESA 95 focuses on the production and consumption of goods and services. This means that the treatment of productive activities in the GFS system differs substantially from the treatment of those activities in the ESA 95. In a longer perspective, it is likely that the GFSM 2001 system, like ESA 95, will assist countries in producing the necessary statistics needed for fiscal management and fiscal policy. The systems will support each other in this regard. Also, since the primary purpose of GFSM 2001 is to provide a comprehensive conceptual and accounting framework for analyzing and evaluating fiscal policy, it will emphasize compiling detailed statistics on the general sector and the measurement of the various impacts of the operations on other sectors of the economy. Therefore, it is likely that the first step in producing financial statistics on the general sector will be to compile fiscal data according to the GFSM 2001 framework. In this connection, a clear understanding of how these systems are related and how they support each other is essential for understanding their inherent advantages. The inclusion of this paper under the GFS companion material on the IMF s website is a step to augmenting that understanding. The paper is divided into four sections. The first section describes the GFSM 2001 framework, highlighting its main features. The second section outlines the ESA 95 1 system, describes the main conceptual differences between ESA 95 and GFSM 2001, and shows a mapping of GFSM 2001 data compiled from ESA 95 source data. The third section discusses the Supplement to the 2002 GFS Yearbook, and the final section briefly overviews the IMF Statistics Department s (STA s) plans regarding GFSM 2001 implementation and data publication in the future GFS yearbooks. 1. The GFSM 2001 system framework The GFSM 2001 framework is an integrated statistical system of flows and stocks for use in macroeconomic analysis. It is harmonized with the other macroeconomic statistical systems, such as the System of National Accounts 1993 (1993 SNA), 1993 Balance of Payments Manual, fifth edition, and Monetary and Financial Statistics Manual (2000). The analytical nature and main features of the GFSM 2001 framework are described next. 1 The ESA 95 is harmonized with the System of National Accounts 1993 (1993 SNA) regarding definitions, accounting rules, and classifications.

- 3-1.1 Analytical nature of GFS framework s carry out a multitude of transactions. To manage the operations of and assess their impact on the economy, s must organize these transactions into a framework within which the transactions can be summarized, measured, and analyzed. There is no single method for organizing the data. Methods differ according to the purposes for which s use the data. For accountability purposes, transactions may be organized according to the unit that carries them out, for example, ministries and other administrative units. For detailed planning or operational purposes, transactions may be organized by the kind of item purchased or service provided or by programmed output. For billing or control purposes, transactions may be organized by the transactors with whom the deals. Another purpose of the data is for macroeconomic analysis, which the GFS framework is designed to facilitate. Although there are close links between accounting data and fiscal statistics, they do not serve the same purpose and currently differ in the treatment of particular items. One of the most important emphases in the GFS framework is the basis of recording. Traditionally, s have kept their accounts on a cash basis. This is reflected in the analytical framework of A Manual on Finance Statistics 1986 (1986 GFSM). Including only cash revenues and expenditures has the advantage of focusing the s attention on its liquidity constraint, which was viewed as the most important policy issue, until recently. However, s have become less liquidity constrained in carrying out fiscal policy and have become increasingly concerned about the resource implications of fiscal actions as well as their financing. Cash transactions do not adequately capture either the timing of the policy action or its impact on the economy. In consequence, there has been increasing dissatisfaction with cash transactions as the sole basis for assessing fiscal policy. The analytic framework of the GFSM 2001 reflects these developments. It presents a set of interrelated statements, derived from the 1993 SNA, that integrates flows and stocks. The framework differs considerably from the cash-based framework of the 1986 GFSM, which focused mainly on cash transactions and on selected stocks but did not integrate them. The new framework facilitates a more comprehensive assessment of the economic impact of activity and the sustainability of fiscal policy. Although the GFSM 2001 is harmonized with the ESA 95, an accrual based system, it also emphasizes the cash-based presentation of fiscal statistics in its ment of Sources and Uses of Cash. 1.2 The main features of the GFSM 2001 The GFSM 2001 system is an integrated system of stocks and flows that reconciles the opening and closing balance sheet positions in terms of intervening transactions and other economic flows. Other economic flows consist of holding gains and losses and other changes in the volume of assets and liabilities. The features of the GFSM 2001 framework are illustrated in the following chart, where the transactions in revenue, expense, nonfinancial assets, and financial assets and liabilities are shown on

- 4 - the left-hand side of chart. The holding gains/losses in assets and liabilities, as well as other volume changes in assets and liabilities, are shown in the middle section under other economic flows. Finally, the right-hand side shows the stocks of assets and liabilities. The GFSM 2001 classification system: Transactions Revenue classification Expense classification Other Economic Flows Stocks of Assets and Liabilities Nonfinancial assets Financial assets and liabilities Holding gains/losses in Nonfinancial and Financial Assets and Liabiities Other volume changes in Nonfinancial and Financial Assets and Liabiities Nonfinancial and Financial Assets and Liabiities As a result, the GFSM 2001 framework consists of four analytical statements. Three are based on accrual data for transactions, other economic flows, and balance sheets (see the following diagram): 1. The ment of Operations presents summary information on all transactions and derives important analytic balances from this information. GFSM 2001 analytical framework ment of Operations Net operating balance = Change in net worth due to transactions Opening Balance Sheet Net worth Revenue - Expense = Net operating balance = = = = Nonfinanciafinancial Non- assets assets + + + + Nonfinancial assets Net finanical worth = Financial assets Net lending/ borrowing + = Financial assets ment of Other Economic Flows Change in net worth OEF Change in net f.worth OEF Financial assets Closing Balance Sheet Net worth Nonfinancial assets Net financial worth Financial assets - - - - Liabilities Liabilities Liabilities Liabilities Stocks Transactions Other flows Stocks

- 5-2. The ment of Other Economic Flows presents information on changes in net worth that arise from economic flows other than transactions. These flows are classified as either changes in value (revaluations) or changes in the volume of assets and liabilities. 3. The Balance Sheet represents the stocks of assets, liabilities and net worth at the beginning and the end of the accounting period. The fourth statement the ment of Sources and Uses of Cash (not illustrated here) shows the amounts of cash generated and used in operations and in transactions involving assets and liabilities. Its balancing item is the net change in the stock of cash. Within the statements, the main balancing items of the GFSM 2001 framework are net operating balance, net lending/borrowing, and net worth: The net operating balance equals revenue minus expense, which is a summary measure of the effect of the s transactions on net worth; only revenue and expense transactions affect the net worth. By deducting the net acquisition of nonfinancial assets from the net operating balance, a balance called net lending/borrowing is produced, which measures the extent to which a either provides financial resources to the other sectors of the economy and the rest of the world (net lending) or uses financial resources generated by the other sectors (net borrowing). The net lending/borrowing also is equal to the financing requirement derived as the net of transactions in financial assets and liabilities. It is a measure of the financial impact of activity on the rest of the economy. The s net worth is defined as the difference between total assets and total liabilities, and net financial worth is defined as the difference between financial assets and liabilities. INTEGRATED STATEMENT OF FLOWS AND STOCKS Opening Year 1999 Other volume changes* Closing balance balance Transactions Revaluations Revenue... 71,680 Expense... 64,135 Net worth (Net operating balance)... 92,100 7,545 27,734-19,578 107,802 Nonfinancial assets... 120,329 10,260 23,561 0 154,150 Net financial worth (Net lending/borrowing)... -28,229-2,715 4,173-19,578-46,348 Financial assets... 19,370 2,813 2,986 0 25,169 Domestic... 19,370 2,813 2,986 0 25,169 Foreign... 0 0 0 0 0 Monetary gold and SDRs... 0 0 0 0 0 Liabilities... 47,599 5,527-1,187 19,578 71,517 Domestic... 37,601 3,093-602 19,578 59,670 Foreign... 9,998 2,434-585 0 11,847 * In 1999, the local s recorded for the first time their unfunded pension liabilities related to their employees.

- 6 - The table above, using local data for Iceland, illustrates how the GFSM 2001 system integrates balance sheets with transactions and other economic flows. The system presents multiple analytical balances. The s net worth is shown at the beginning and end of the accounting period, along with the main reasons for changes in the balance sheet, namely, transactions, revaluations, and other volume changes. The GFSM 2001 framework provides a range of possibilities for fiscal analysis, especially concerning fiscal liquidity and sustainability issues. A major innovation of the GFSM 2001 framework is that it parallels a set of business accounts, allowing a nuanced view of fiscal sustainability through the measurement of net worth, as well as net operating balance and net lending/borrowing. When compiled using comprehensive accrual information, these measures reflect more accurately the impact of resource flows. The analysis of net worth (the stock of assets minus liabilities) should focus policy attention on the structure of the s balance sheet and the portfolio choice among assets (and liabilities). 2. The relationship between ESA 95 and GFSM 2001 This section describes the ESA 95 system, outlines the main differences between the ESA 95 and GFSM 2001 frameworks, and illustrates the broad linkage between the ESA 95 accounts and GFS tables. 2.1 Short description of ESA 95 The ESA 95 system of national accounts (based on the 1993 SNA) consists of a coherent, consistent, and integrated set of macroeconomic accounts, balance sheets, and tables based on a set of internationally agreed concepts, definitions, classifications and accounting rules. It provides a comprehensive and detailed record of the complex economic activities taking place within an economy and of the interaction between the different economic agents, and groups of agents, that takes place in markets or elsewhere. It is essential for observing and analyzing the economic interactions taking place between the different sectors of the economy and to understanding the workings of the economy. The ESA 95 is built around a sequence of interconnected flow accounts linked to different types of economic activities taking place within a given period of time, together with balance sheets that record the values of stocks of assets and liabilities held by institutional units or sectors at the beginning and end of the accounting period. The main sets of accounts in the system are the current accounts, the accumulation accounts, and the balance sheet. The current accounts comprise the production account and the income accounts, the latter being further divided into the primary distribution, secondary distribution, and use of income accounts (see the sequence of accounts below). The accumulation accounts consist of the capital account and the financial account. The sequence of accounts is compiled for each institutional sector in the economy (e.g., general ) and for the economy as a whole.

- 7 - Rest of the world NPISH Integrated Economic Accounts HH GG FC NFC NFC FC GG HH NPISH Rest of the world Uses Current Accounts Resources Changes in Assets Accumulation Accounts Changes in Liabilities & NW Assets Balance Sheets Liabilities & NW GG: NPISH: Non Profit Institution Serving Households FC: Financial Corporations NFC: Non-Financial Corporations HH: Households Each account involves a balancing item defined residually from the transactions recorded on the two sides of the account. The balancing item from one account is carried forward as the first item in the following account, thereby making the sequence of accounts an articulated whole. The main balancing item from the current accounts is saving, and from the capital account net lending/borrowing, which is also the balancing item for the financial account. Primary income distrtibution Uses Production account Resources Intermediate consumption = Value added (gross) Consumption of fixed capital (-) = Value added (net) Output Generation of Uses income account Resources Compensation of employees Taxes on production Subsidies on production (-) = Operating surplus Value added Allocation of primary Uses income account Resources Property expense Operating surplus Comp. of employees Taxes on production Subsidies (-) = Balance of primary income Property income The production account emphasizes value added as a balancing item. It covers output and the use of goods and services (intermediate consumption) to produce this output. For the economy as a whole this balancing item corresponds to gross domestic product (GDP) Primary income is income that accrues to units as a consequence of their involvement in processes of production or ownerships of assets. The generation of income account shows the sectors in which primary incomes originate from production. From the point of view of producers, this account shows how the value added as resources generates income for factors of labor, capital, and. The operating surplus is the balancing item. The allocation of primary income account focuses on sectors in their capacity as recipients of primary incomes. It covers the distribution of the operating surplus, net property income, compensation of employees and taxes less subsidies on production. The balance of primary income is the balancing item. For the total economy this item corresponds to national income.

- 8 - Secondary income distiribution Secondary distribution of Uses income account Resources Current taxes on income, Balance of primary income wealth, etc. Social contributions Current taxes on income, Social benefits ( in kind) wealth, etc. Other current transfers Social contributions Social benefits ( in kind) = Disposable income Other current transfers Redistribution of income Uses in kind account Resources Social transfers in kind = Adjusted disposable income Disposable income Social transfers in kind The secondary distribution of income shows how the balance of primary income of an institutional unit or sector is transformed into its disposable income by the receipts or payment of current transfers. In addition to carrying forward the balance of primary income, it records current taxes on income, wealth, etc., social contribution and benefits, and other current transfers. Since these transfers are resources for some sectors and uses for others, they appear on both sides of the account. The balancing item disposable income can be used for final consumption and saving. The redistribution of income in kind account reallocates social benefits in kind and transfers of individual nonmarket goods and services from the purchasing sector to the using sector. Uses Use of income account Resources Final consumption Disposable income expenditure Adjustment for the Adjustment for the change of households on change of household on pension funds pension funds = Saving The use of income account shows, for, nonprofit institutions serving households (NPISHs), and households, how disposable income or adjusted disposable income is allocated between final consumption and saving, which is the balancing item. Accumulation accounts Changes in assets Changes in assets Financial account in liabilities and net worth Net acquisition of financial assets Monetary gold and SDRS Currency and deposits Securities other than shares Loans Shares and other equities Insurance technical reserves Other accounts receivables Capital account in liabilities and net worth Gross fixed capital formation Saving, net Consumption of fixed capital (-) Capital transfers, receivable Changes in inventories Capital transfers, payable (-) Acquisition less disposals of valuables Acquisition less disposals of nonproduced non-financial assets Net lending (+) / net borrowing (-) Net incurrence of liabilities Currency and deposits Securities other than shares Loans Shares and other equities Insurance technical reserves Other accounts receivables Net lending (+) / net borrowing (-) The capital account records the acquisitions/disposals of nonfinancial assets and capital transfers. The right side comprises net saving and net capital transfers, i.e., changes in net worth due to saving and capital transfers. The left side shows transactions in nonfinancial assets. The balancing item is either net lending (+), which measures the net amount a unit or a sector has available to finance other units or sectors, or net borrowing (-), which corresponds to the amount a unit or a sector is obliged to borrow from others. The financial account records transactions in financial assets and liabilities. It is classified by financial instrument. The net acquisition of financial assets is shown on the left side, and the net incurrence of liabilities on the right side. The balancing item is again net lending (+) or net borrowing (-), which appears this time on the right side of the account. In principle, net lending or net borrowing is measured identically, whichever account is considered. In practice, achieving this identity is one of the most difficult targets of national accounts.

- 9-2.2 The main conceptual differences between the ESA 95 and GFSM 2001 frameworks Several conceptual differences exist between the ESA 95 and GFSM 2001 data, which need to be addressed with the EU countries for purposes of regular GFS reporting and data publication. Three of the most significant are the presentation of social security, the treatment of employer retirement pension schemes, and the consolidation rules for transactions and balances. A fourth difference exists with the Maastricht Excessive Deficit Procedure (EDP) treatment of interest rate swaps agreements. Regarding the first significant difference, the GFS presentation includes social security as part of the sector that administers the social security scheme. In most countries social security schemes are administered by the central. They are presented in GFS, unconsolidated, as a subsector of central, and also consolidated with the budgetary and extrabudgetary entities to show the consolidated central. In ESA 95, the social security schemes are a separate subsector and not consolidated in central. Second, according to the GFSM 2001 methodology, contributions and benefits paid under employer unfunded pension schemes are treated as financial transactions. In ESA 95, these transactions are treated as contributions and benefits in the current accounts. The GFSM 2001 presentation requires an imputation of liabilities related to the unfunded pension schemes, and imputed interest on that liability. The difference between the GFSM 2001 and ESA 95 treatments of these transactions will affect the respective measures of net lending/borrowing. Third, the GFS consolidation rules require the elimination of transactions between general units, as well as stocks of assets and liabilities that represent claims by one general unit on another general unit. The transactions that can be more easily identified in practice are interest, taxes, grants, and financing transactions. In ESA 95, flows and stocks between constituent units are not consolidated as a matter of principle. However, consolidated accounts may be built up for complementary presentations and analysis. Finally, both the ESA 95 and GFSM 2001 require that transactions in interest rate swaps and forward rate agreements be recorded as financial derivatives transactions. However, current reporting under the Maastricht EDP places these transactions under expenditure rather than under financial assets. Other differences between ESA 95 and GFSM 2001 regarding revenue and expense A. Revenue: 2 Social contributions [GFSM 2001 code 122]: In ESA 95 in order to present income information that may be more useful for analyzing the behavior of the households concerned, pension contributions to social insurance schemes and pension benefits to households are recorded as transfers in the secondary distribution of income account. However, households are also treated in the financial accounts and the balance sheet as owning the reserves of funded pension schemes. To reconcile these two views, ESA 95 incorporates an adjustment item in the use of income 2 Numbers in brackets [ ] represent GFSM 2001 codes.

- 10 - account to remove the change in net equity of households from saving, that is, the transactions are recorded twice and adjusted out once. In GFSM 2001, these transactions are recorded once as financial items. In addition, GFSM 2001 treats unfunded employer pension schemes identically with the funded schemes. (See GFSM 2001 annex to chapter 2.) Sales of goods and services in GFS are classified into four subcategories. The ESA 95 does not provide this detailed information, although the information is used by national accountants to calculate final consumption expenditure in the use of income accounts. B. Expense: Compensation of employees [21] and Use of goods and services [22]: In GFS, expenses related to construction of nonfinancial assets on own account (own capital formation) are excluded from current expense. They are only recorded under net acquisition of nonfinancial assets [31]. In ESA 95, these entries are recorded in three separate places in the system of accounts: as current expenses and grossed up to measure output and capital formation. Subsidies [25]: In ESA 95, subsidies are classified as (1) subsidies on products and (2) subsidies on production. In GFS, subsidies are classified according to the type of institutional units that receive them. Social benefits [27]: See social contributions [122]. Interest [24]: In GFS, interest payments are classified into (1) interest to nonresidents, (2) interest to residents other than general, and (3) interest to general. In ESA 95, interest payments are identified by each sector s (e.g., the general sector s) total interest payments, indistinguishable between residents and nonresidents. Also, interest payments to nonresidents by each sector are not separately identified (only the economy s total interest payments to nonresidents are identified). Capital transfers, which consist of capital grants [2612,2622,2632] and miscellaneous other capital expense [2822] in GFS, are classified as expense in GFS, since they reduce the net worth. In ESA 95, capital transfers are recorded in the capital account along with net acquisition of nonfinancial assets. This means that the net operating balance in GFS, which is the equivalent to change in net worth due to transactions, is comparable with the ESA 95 concept saving plus net capital transfers. 2.3 A broad linkage between the ESA 95 accounts and GFSM 2001 tables To show the broad linkage between the GFSM 2001 and ESA 95, the main accounts of these two systems are presented side by side in Appendix 1. Data are used to illustrate the relationship between the accounts of the systems. As an example, the linkage between the resource side of the ESA 95 primary income account and the GFS accounts is marked with arrows. It is clear from the appendix that the two systems present their fiscal data quite differently. The GFS presents the revenue and expense data similar to usual business accounting systems (in revenue and expense accounts), but the ESA 95 data are shown in a production account and various income accounts, linked together.

- 11 - For further illustration, Appendix 2 shows how the GFSM 2001 classifications relate to the ESA 95 framework accounts. Using a typical national accounts presentation (a sequence of accounts), 3 the GFS categories are filled in and marked with GFS codes on the left side, both under the use and resource side. The SNA codes are shown on the right side. 3. The Supplement to the 2002 GFS Yearbook In 2002 the IMF s Statistics Department published a Supplement to the 2002 Finance Statistics Yearbook. The purpose of the Supplement was to illustrate that countries could use different approaches for compiling fiscal data according to the GFSM 2001 framework. Three approaches were illustrated: The first approach was based on underlying accrual data. 4 The second approach used ESA 95 national accounts data that were already available on an accrual basis. The third approach demonstrated that cash fiscal data can be reclassified to the GFSM 2001 framework to utilize some of the informational advantages of the system. A fourth approach, not demonstrated in the Supplement, will evolve as cash reporting countries introduce accrual components in their data. This will typically involve a gradual progress of starting with cash data and, over time, adding more accrual items. In collaboration with Eurostat (the European Union s statistical agency) and the European Bank, the IMF staff developed a method for compiling GFSM 2001 data from ESA 95 national accounts data for the general sector as reported by the member countries of the European Union (EU) to Eurostat (see Appendix 3). The data were published in the Supplement to the 2002 GFS Yearbook. At that time the complete ESA 95 national accounts reporting system was not yet fully implemented. Consequently, some of the tables show gaps. Moreover, since the ESA 95 focuses on the national accounts, the data do not fully satisfy the detailed classification requirements of GFSM 2001. The ESA 95 data presented in the Supplement were complemented by additional information collected directly from the fiscal agencies of the EU member countries. The country page for Belgium in Appendix 4 is as an example of the GFSM 2001 statistical tables presented in the Supplement. 4. Future agenda: 2003 GFS Yearbook and plans regarding GFSM 2001 implementation In May 2003, the IMF sent its member countries a revised GFS Yearbook questionnaire in the format of the GFSM 2001 framework, requesting that countries fill in relevant data according to the new methodology. To assist the countries in this task, the Statistics Department (STA) converted historical GFS data for 1990-2000 to the GFSM 2001 framework. The 2003 GFS Yearbook questionnaire included the two last reported years data for explanatory purposes. In March 2004, the 2003 GFS Yearbook was published, and the fiscal data were presented according to the GFSM 2001 framework. This experience will serve as the foundation for the processing and dissemination of future GFS yearbooks. The IMF will encourage its member countries to implement the GFSM 2001 methodology. It is recognized that the implementation of the fully integrated system presented in the GFSM 2001 will take time and progress will be determined by the different needs and circumstances of each country involved. Countries will need to revise their fiscal data classifications systems and the underlying 3 See Table A.V.5. in 1993 SNA or Table A.IV.5 in ESA 95. 4 Accrual data submitted by the national authorities.

- 12 - accounting systems to reflect fully the accrual basis of recording while still capturing data on a cash basis. To facilitate this implementation process, the IMF has conducted courses and seminars in recent years on the GFSM 2001 methodology and, in the future, will provide additional training and technical assistance on the GFSM 2001 and develop companion material to the GFSM 2001 for dissemination on the IMF website.

- 13 - Appendix 1. GFSM 2001: ESA 95: GFS-accounts for a country: 2001 Revenue 113,435 Taxes 100,772 - Current taxes on income, etc. 64,011 - Taxes on production 36,761 Social insurance contributions 4,359 Grants 1,500 - Current 1,250 - Capital 250 Other revenue 6,804 - Property income 2,773 - Sales of goods and services 2,053 - Fines, fees, etc. 288 - Other transfers 1,690 Expense 135,360 Compensation of employees 63,317 Use of goods and services 22,345 Consumption of capital 3,549 Property expense 24,812 Subsidies 5,503 Grants - Social benefits 15,834 Other transfers - Net operating balance -21,925 Non-financial assets 7,244 Net acquisition of fixed assets 5,771 Inventory change 899 Valuables - Non-produced non-financial assets 574 Net lending / borrowing -29,169 Net acquisition of financial assets 2,064 Domestic 1,814 Foreign 250 Net incurrence of liabilities 31,233 Domestic 28,837 Foreign 2,396 1) Own capital formation 5,515 Compensation of employees 3,315 Use of goods and services 2,200 2) final consumption = Output - Own capital formation - Sales of goods and services Uses Production account Resources Intermediate consumption: Outputs: Use of goods and services 22,345 Compensation of employees 63,317 Use of goods and services Use of goods and services 22,345 in own capital formation 1) 2,200 Consumption of fixed capital 3,549 ----------- Own capital formation 1) 5.515 Gross value added 70,181 --------- ----------- 94,726 Consumption of fixed capital 3,549 ====== Net value added 66,632 ====== Uses Generation of income Resources Comp. of employees 63,317 Net value added 66,632 Comp. of employees in 3,315 ===== own capital formation --------- Comp. of employees 66,632 --------- Taxes Subsidies - Operating surplus - ====== Uses Primary income account Resources Property expense 24,812 Operating surplus - Taxes on production 36,761 Subsidies -5,503 Property income 2,773 -------- Balance of primary income 9,219 34,031 ====== ====== Uses Secondary income account Resources Current grants - Balance of primary income 9,219 Social benefits 15,834 Current taxes, income, etc. 64,011 Other current transfers - Current grants 1,250 Social contribution 4,359 Fines, fees, etc. 288 Other current transfers 1,690 -------- Disposable income, net 64,983 80,817 ====== ====== Govt. final consumption = 94,726-5,515-2,053 = 87,158

- 14 - Appendix 1 (continued) ESA 95 continued: Uses Use of income account Resources final Disposable income 64,983 consumption 2) 87,158 ---------- Saving, net 3) -22,175 ======= Change in assets Capital account in liab. and net worth Fixed assets 5,771 Saving net -22,175 Inventories 899 Valuables - Capital transfers 250 Nonproduced NFA 574 ------ [Saving & capital Net lending/borrowing -29,169 transfers -21,925] 3) ====== Change in assets Financial account in liab. and net worth Net acq. of financial assets 2,064 Net lending/borrowing -29,169 [needs to be classified by Net incurrence of liabilities 31,233 instruments] [needs to be classified by instruments] 3) In ESA 95, capital transfers are recorded in the Capital Account along with net acquisition of nonfinancial assets. This means that the net operating balance in GFS, which is the equivalent to change in net worth due to transactions, is comparable with the ESA 95 concept saving plus net capital transfers.

- 15 - Appendix 2 Relationship between GFSM2001 and SNA93/ESA95 Use Resource I. Production account P.2 Intermediate consumption P.1 Output 22 Use of goods and services P.2 21 Compensation of employees D.1 211 Wages and salaries D.11 + Own capital formation, use of goods and services 1) 2111 Wages and salaries in cash D.111 2112 Wages and salaries in kind D.112 212 Social contributions D.12 B.1g Value added, gross 2121 Actual social contributions D.121 2122 Imputed social contributions D.122 23 Consumption of fixed capital K.1 22 Use of good and services P.2 23 Consumption of fixed capital K.1 + Own capital formation 1) B.1n Value added, net II.1.1 The Generation of Income Account D.1 Conpensation of employees B.1n Value added, net 21 Compensation of employees 1) D.1 211 Wages and salaries D.11 2111 Wages and salaries in cash D.111 2112 Wages and salaries in kind D.112 212 Social contributions D.12 2121 Actual social contributions D.121 2122 Imputed social contributions D.122 + Taxes on production paid by units D.29 - Subsidies received by units D.39 B.2 Operating surplus D.4 Property expense 2) B.2 Operating surplus 24 Interest D.41 112 Taxes on payroll and workforce D.29 241 To nonresidents D.411 1131 Recurrent taxes on immovable property / paid by enterprises D.29 242 To residents other than general units D.412 1132 Recurrent taxes on net wealth / paid by enterprises D.29 243 To general units D.413 1134 Taxes on financial and capital transactions D.29 281 Property expense other than interest D.42 1136 Other recurrent taxes on property / paid by enterprises D.29 2811 Dividends D.421 11411 Value added taxes D.211 2812 Withdrawals from income of quasi-corporations D.422 11412 Sales taxes D.214 2813 Property expense attributed to insurance policyholders D.44 11413 Turnover and other general taxes on goods and services D.214 2814 Rent D.45 1142 Excises D.214 1143 Profits of fiscal monopolies D.29 1144 Taxes on specific services D.214 11451 Motor vehicles taxes / paid by enterprises D.214 11452 Other taxes on use of goods, or on permission, etc. D.29 11461 Severance taxes D.29 11462 Miscellanceous other taxes on G&S / paid by enterprises D.214 1151 Customs and other import duties D.2121 1152 Taxes on exports D.213 1153 Profits of export and imports monopolies D.29 1154 Exchange profits D.214 1155 Exchange taxes / paid by enterprises D.214 1156 Other taxes on int. trade and trans. / paid by enterprises D.29 1161 Other taxes paid solely by business D.29 1162 Other taxes paid by other than business or unidentified D.29 B.5 Balance of primary incomes II.1.2 The Allocation of Primary Income Account 141 Property income 2) D.4 1411 Interest D.41 1412 Dividends D.421 1413 Withdrawals from income of quasi-corporations D.422 1414 Property income attributed to insurance policyholders D.44 1415 Rent D.45 25 Subsidies (-) D.3 251 To public corporations - 2511 To public nonfinancial corporations - 2512 To public financial corporations - 252 To private enterprises - 2521 To private nonfinancial enterprises - 2522 To private financial enterprises -

- 16 - Appendix 2 Relationship between GFSM2001 and SNA93/ESA95 Use Resource II.2 The Secondary Distribution of Income Account + Current taxes on income, wealth, etc B.5 Balance of primary incomes 27 Social benefits, in cash 111 Taxes on income, profits, and capital gains D.51 2711 Social security benefits in cash D.621 1111 Payable by individuals - 2721 Social assistance benefits in cash D.624 1112 Payable by corporations and other enterprises - 2731 employee social benefits in cash D.623 1113 Unallocable - 26 Grants, current 1131 Recurrent taxes on immovable property / final consumers D.59 2611 To foreign s, current D.75 1132 Recurrent taxes on net wealth / paid by final consumers D.59 2621 To international organizations, current D.74 1136 Other recurrent taxes on property / paid by final consumers D.59 2631 To general units, current D.73 11451 Motor vehicles taxes / paid by final consumers D.59 2821 Other current expense D.75 11452 Other taxes on use of goods, permission to use goods, etc D.59 11462 Miscellanceous other taxes on G&S / final consumers D.59 1155 Exchange taxes / paid by final consumers D.59 1156 Other taxes on int. trade and transactions / final consumers D.59 12 Social contributions D.61 121 Social security contributions - 122 Other social contributions - 13 Grants, current 1311 Grants from foreign / current D.75 1321 Grants from international organizations / current D.74 1331 Grants from general units / current D.73 143 Fines, penalties, anf forfeits D.75 1441 Voluntary transfers other than grants / current D.75 145 Miscellanceous and unidentified revenue D.75 B.6 Disposable income P.3 Final consumption expenditure B.6 Disposable income 21 Compensation of employees D.1 211 Wages and salaries D.11 2111 Wages and salaries in cash D.111 2112 Wages and salaries in kind D.112 212 Social contributions D.12 2121 Actual social contributions D.121 2122 Imputed social contributions D.122 22 Use of good and services P.2 23 Consumption of fixed capital K.1 - Own capital formation 1) 142 Sales of goods and services P.2 1421 Sales by market establisments 1422 Administrative fees 1423 Incidental sales by nonmarket establisments 1424 Imputed sales of goods and services B.8 Saving, net II.4.1 Use of Disposable Income Account 31 Acquistion of nonfinancial assets P.51 B.8 Saving, net 311 Fixed assets D.511 1133 Estate, inheritance, and gift taxes D.99 3111 Buildings and structures 1135 Other nonrecurrent taxes on property D.91 3112 Machinery and equipment 1312 Grants from foreign / capital D.92 3113 Other fixed assets 1322 Grants from international organizations / capital D.92 312 Inventories P.52 1332 Grants from general units / capital D.92 313 Valuables P.53 1442 Voluntary transfers other than grants / capital D.99 314 Nonproduced assets K.2 26 Grants, capital 2611 To foreign s, capital D.92 2621 To international organizations, capital D.92 2631 To general units, capital D.92 2821 Other capital expense D.99 23 Consumption of fixed capital K.1 B.9 Net lending / borrowing III.1 Capital Account

- 17 - Appendix 3. The mapping between Eurostat database and GFS Tables Revenues Eurostat Table 0900: Detailed tax and social contribution receipts by type of tax or social contribution and receiving subsector Expenses and transactions in Non-financial assets Transactions in Financial assets and Liabilities Stocks in Financial assets and Liabilities Eurostat Table 0800, receivable: Full sequence of accounts of institutional sectors Eurostat Table 0800, payable: Full sequence of accounts of institutional sectors Eurostat Table 0200: Main aggregates of (revenue side) Eurostat Table 0200: Main aggregates of (expenditure side) Eurostat Table 0600: Transactions in Financial assets and Liabilities Eurostat Table 0700: Stocks in Financial assets and Liabilities GFS Table 1: Revenues GFS Table 2: Expenses GFS Table 3: Transactions in Assets and Liabilities GFS Table 6: Stocks in Financial assets and Liabilities

- 18 - GFS Tables 1 and 2 Appendix 3 The mapping between the Eurostat database and GFS Tables Revenues Expenditures Table 0900: Detailed tax and social contribution receipts by type of tax or social contribution and receiving subsector Table 0900 Social security Eurostat Table 0900 Table 0800, receivable: Full sequence of accounts of institutional sectors Table 0800, payable: Full sequence of accounts of institutional sectors Table 0800 Social security Table 0800 Social security Eurostat Table 0800 Eurostat Table 0800 Table 0200: Main aggregates of (revenue side) 1) Table 0200: Main aggregates of (revenue side) 2) Social security Social security Eurostat Table 0200 Data for GG derived from Tables From Eurostat Tables 0900 and 0800, receivable 9 &8 are compared with Table 0200 Eurostat Table 0200 From Eurostat Table 0800, payable Data for GG derived from Tables 9 &8 are compared with Table 0200 Table 1: Revenue Table 2 Expense and Table 3 Acquisition of Non-financial assets Table 1 Social security Table 2 & 3 (NFA) Social security IMF's GFS Table 1 IMF's GFS Tables 2 and 3 (on NFA) 1) The 'ESA 95' Questionnaire Table 0200, which contains the total revenue, total expenditure, and the net lending / borrowing of the, is used for creating corresponding aggregates for the subsectors of the. To calculate the total revenue of each subsector, an assumption has to be made of how the revenue item 'Other non-market output' (TRP13) is divided between its two sub-items, i.e. 'Payment for other non-market output' (TRP131) and 'Other non-market output' (TRP132). The division (proportion) that appears in Table 0200 for the sector is used. 2) Since we have the total revenues and net lending/borrowing for each subsector, the total expenditures for each can be calculated. There is only one item unknown on the expenditure side for each subsector, i.e. Social transfers in kind related to expenditure on products supplied to households via market producers (payable) (TRD6311PAY +TRD63121PAY+TRD63131PAY), which can now be calculated as a rest item.

- 19 - GFS Tables 3 and 6 Appendix 3 The mapping between the Eurostat database and GFS Tables Transactions in assets and liabilities Flows and Stocks in Assets and Liabilities Table 0800, payable: Full sequence of accounts of institutional sectors Table 0800 Social security Eurostat Table 0800 Table 0800, payable: Full sequence of accounts of institutional sectors Table 0600, Financial accounts by sectors (transactions) Table 0800 Social security Table 0600 Social security Eurostat Table 0800 Eurostat Table 0600 Table 0600, Financial accounts by sectors (transactions) Table 0700, Balance sheets for financial assets and liabilities (stocks) Table 0600 Social security Table 0700 Social security Eurostat Table 0600 Eurostat Table 0700 Table 3: Transactions in assets and liabilities Table 6 Flows and stocks in assets and liabilities Table 3 Social security Table 6 Social security IMF's GFS Table 3 IMF's GFS Table 6

- 20 - Appendix 4 Units of Reference Number Units Covered by Budget 1. Judiciary, ministries, monarchy, and parliament 2. Councils of the communities and regions Units with Individuals Budgets 3. 80 (approx.) agencies and extrabudgetary funds 4. National Pension Fund for Employees 5. National Retirement and Old Age Pension Fund 6. Special Family Allowance Funds 7. Work Accidents Fund 8. 13 other social security funds and s 9. 9 provinces 10. Metropolitan Brussels 11. 589 communes Supranational Authorities 12. Operations of institutions of the EU within Belgium Notes: Some entities in units 3-8 have individual budgets but are also included in budgets of ministries. Data coverage Data in central tables cover operations of units 1-8; unit 3 is extrabudgetary, and units 4-8 comprise social security funds. Data in local tables cover operations of units 9-11. This institutional table is based on information reported in 2000. Relative size of s in terms of gross expenditure in year 2000 10 20 30 40 50 60 70 80 90 s s 10 20 30 40 50 60 70 80 Selected economic aggregates 2000 Gross Domestic Product (GDP), current prices 248,336 Millions of Euros GDP per capita 24,237 Euros revenue 49.5 % of GDP tax revenue 30.9 % of GDP outlays 49.3 % of GDP expense 49.2 % of GDP liabilities 110.0 % of GDP Currency unit per US$, year 2000 1.0854 Population 10.2 Million Belgium 124 100% 90 100% Millions of Euros / Year Ending December 31 and local s 1998 1999 2000 1998 1999 2000 1998 1999 2000 I. STATEMENT OF GOVERNMENT OPERATIONS 1 Revenue... 98,438 102,643 108,460 39,154 41,626 42,599 111,808 117,004 122,881 2 Expense... 101,432 104,994 108,367 38,495 40,308 42,088 113,867 117,794 122,280 Net operating balance (1-2=3)... -2,994-2,351 93 659 1,318 511-2,059-790 601 31 Net acquisition of nonfinancial assets... -273 34-36 -177 320 487-451 354 451 Net lending / borrowing (3-31=32-33)... -2,721-2,385 129 836 998 24-1,608-1,144 150 32 Net acquisition of financial assets... -2,192-361 -245 57 831-828 -1,741 601 178 33 Net incurrence of liabilities... 235 1,855 68-374 -1,000-292 282 1,044 466 Statistical discrepancy between NLB and Financing 294 169-442 -405 833-560 -415 701-438 II. STATEMENT OF OTHER ECONOMIC FLOWS 4,5 Change in net worth.............................. 41,51 Changes in nonfinancial assets.............................. 42,52 Changes in financial assets.............................. 43,53 Changes in liabilities.............................. III. BALANCE SHEET 6 Net worth.............................. 61 Nonfinancial assets.............................. 62 Financial assets... 18,935 20,375 22,179 4,739 5,543 4,938 17,403 19,256 19,314 63 Liabilities... 248,089 250,984 253,294 29,035 28,035 27,743 270,852 272,357 273,233 IV. STATEMENT OF SOURCES AND USES OF CASH 1 Receipts from operating activities.............................. 2 Payments for operating activities.............................. Net inflow from operating activities (=1-2).............................. 31 Net outflows from investments in nonfinancial assets.............................. Cash surplus/deficit (=1-2-31).............................. 32* Net acquisition of financial assets other than cash.............................. 33 Net acquisition of liabilities.............................. Net change in the stock of cash (=3212+3222)..............................

- 21 - Belgium 124 Millions of Euros / Year Ending December 31 and local s 1998 1999 2000 1998 1999 2000 1998 1999 2000 TABLE 1. REVENUE 1 Revenue... 98,438 102,643 108,460 39,154 41,626 42,599 111,808 117,004 122,881 11 Taxes... 61,794 64,466 68,895 7,365 7,971 7,789 69,160 72,438 76,680 111 Taxes on income, profits and capital gains... 36,517 37,019 40,174 1,623 1,820 1,411 38,141 38,839 41,585 1111 Individuals... 28,713 29,192 31,691 1,623 1,820 1,411 30,337 31,012 33,102 1112 Corporations and other enterprises... 7,715 7,668 8,249 0 0 0 7,715 7,668 8,249 112 Taxes on payroll and workforce... 24 22 22 0 0 0 24 22 22 113 Taxes on property... 2,055 2,100 2,193 4,266 4,557 4,808 6,321 6,657 6,999 114 Taxes on goods and services... 23,047 25,151 26,345 1,370 1,490 1,486 24,417 26,642 27,829 1141 value added, sales, or turnover taxes... 14,440 16,074 17,118 0 0 0 14,440 16,074 17,118 1142 Excises... 5,410 5,608 5,705 376 376 363 5,787 5,984 6,067 115 Taxes on internnational trade and transactions... 0 0 0 0 0 0 0 0 0 116 Other taxes... 151 174 161 106 104 84 257 278 245 12 Social contributions... 34,085 35,473 36,754 2,934 3,074 3,213 37,019 38,545 39,967 121 Social security contributions... 32,338 33,703 34,944 16 16 16 32,354 33,718 34,960 122 Other social contributions... 1,747 1,770 1,810 2,918 3,058 3,197 4,665 4,827 5,007 13 Grants... 359 423 381 25,355 26,873 27,713 223 272 190 131 From foreign s... 0 0 0 0 0 0 0 0 0 132 From international organizations... 129 171 125 94 101 64 223 272 190 133 From other general units 1)... 230 252 256 25,261 26,772 27,649 0 0 0 14 Other revenue... 2,200 2,281 2,430 3,500 3,708 3,884 5,406 5,749 6,044 141 Property income... 1,223 908 1,387 1,241 1,313 1,358 2,169 1,981 2,476 142 Sales of goods and services 2)... 694 727 731 1,971 2,068 2,192 2,666 2,795 2,923 143 Fines, penalties and forfeits... 0 0 0 0 0 0 0 0 0 144 Voluntary transfers other than grants... 9 364 35 39 49 59 48 413 93 145 Miscellaneous and unidentified revenue... 274 282 277 249 278 275 523 560 552 TABLE 2. EXPENSE BY ECONOMIC TYPE 2 Expense... 101,432 104,994 108,367 38,495 40,308 42,088 113,867 117,794 122,280 21 Compensation of employees... 7,082 7,459 7,631 18,979 19,834 20,713 26,061 27,294 28,345 211 Wages and salaries... 4,867 5,189 5,307 13,796 14,406 15,110 18,663 19,596 20,417 212 Social contributions... 2,215 2,270 2,324 5,183 5,428 5,603 7,398 7,698 7,928 22 Use of goods and services... 2,362 2,551 2,816 4,356 4,693 4,914 6,719 7,245 7,729 23 Consumption of fixed capital... 653 633 621 3,095 3,203 3,358 3,748 3,836 3,979 24 Interest payments... 15,719 15,357 15,622 1,427 1,422 1,505 16,849 16,539 16,857 25 Subsidies... 1,587 1,774 1,908 1,699 1,710 1,800 3,286 3,484 3,708 26 Grants... 25,739 27,289 28,215 250 251 266 498 531 576 263 To other general units 1)... 25,261 26,772 27,649 230 252 256 0 0 0 2631 Current... 25,134 26,673 27,277 227 246 250 0 0 0 2632 Capital... 127 99 372 3 6 6 0 0 0 27 Social benefits 3)... 44,848 46,404 47,962 4,750 4,953 5,385 49,326 51,098 53,347 28 Other expense... 3,442 3,527 3,592 3,939 4,242 4,147 7,380 7,767 7,739 281 Property expense other than interest... 0 0 0 0 0 0 0 0 0 282 Miscellaneous other expense... 3,442 3,527 3,592 3,939 4,242 4,147 7,380 7,767 7,739 2821 Current... 2,009 2,245 2,222 2,219 2,344 2,331 4,227 4,587 4,553 2822 Capital... 1,433 1,282 1,370 1,720 1,898 1,816 3,153 3,180 3,186 TABLE 3. TRANSACTIONS IN ASSETS AND LIABILITIES 3 Change in net worth... -2,700-2,182-349 254 2,151-49 -2,474-89 163 31 Nonfinancial assets... -273 34-36 -177 320 487-451 354 451 311 Fixed assets... -89 5-36 -171 322 494-261 327 458 3111 Buildings and structures.............................. 3112 Machinery and other equipment.............................. 3113 Other fixed assets.............................. 312 Inventories... 5 10-6 0 0 0 5 10-6 313 Valuables... 0 0 0 0 0 0 0 0 0 314 Nonproduced assets... -189 19 6-6 -2-7 -195 17-1 32 Financial assets... -2,192-361 -245 57 831-828 -1,741 601 178 321 Domestic.............................. 322 Foreign.............................. 33 Liabilities... 235 1,855 68-374 -1,000-292 282 1,044 466 331 Domestic.............................. 332 Foreign..............................